KeyBanc Raises Square (SQ) PT to $250 on Rising Cash App Value

(Updated - November 16, 2020 8:39 AM EST)

(updated to add analyst comments)

KeyBanc analyst Josh Beck raised the price target on Square (NYSE: SQ) to $250.00 (from $215.00) while maintaining an Overweight rating on the rising Cash App value.

Cash App is now a "powerful consumer digital banking and commerce ecosystem with transformative potential," Beck writes in a note sent to clients today.

"Rising adoption of products like Cash Card (supported by recent KBCM Consumer Survey work) and Direct Deposit translates into higher engagement (and thus retention/LTV) and ARPU potential, which could sustain hypergrowth beyond the core Digital Acceleration period that has materialized in 2020. Our base case assumes Cash App adjusted revenue (ex-BTC) grows at a ~73% CAGR through FY22, exiting at a ~$4.4B run-rate, primarily driven by Cash Card (assuming roughly one-third of MAUs adopt the card) and Instant Deposit revenue."

The bull case on Cash App is focused on the recent momentum that is driven by a “halo effect from stimulus payments and equity trading, proves durable as retention is favorable and multi-product adoption increases, leading to higher engagement and ARPU."

“We raise our Cash App bull/base/bear cases to $300/$200/$75 from $150/$90/$25 based on our updated ~200 row bottom-up revenue model based on send, spend, and invest buckets. We raise our 2021E with KBCM at $2,540M S&S revenue vs. the Street at $2,030M,” concludes Beck.

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